J.C. Penney High-Flying Executives Seen Hampering Revamp

March 21 (Bloomberg) -- J.C. Penney Co. Chief Executive
Officer Ron Johnson, who is struggling to overhaul the
department-store company, risks making his task harder by hiring
at least nine key executives who live a plane ride away.

Johnson, 54, and executive vice presidents Ben Fay and
Laurie Miller commute from California to the retailer’s
headquarters in Plano, Texas, said three people with direct
knowledge of the situation. Chief Creative Officer Michael
Fisher and senior design and trends executive Nick Wooster fly
from New York, while construction executive Bob Laughrea
commutes from Boston, said the people, who asked not to be
identified, citing agreements with the company. The company pays
for the commutes, they said.

“For a company that’s in turmoil, you really do have to
have the senior leaders of a company, if for no other reason
than showing face time, show that they’re committed, accessible,
aware of what’s going on there,” Howard Gross, managing
director of the retail and fashion practice at executive search
firm Boyden in New York, said in a telephone interview. “To
have them not be there on a regular basis I think sends a very,
very bad message.”

Much hoopla accompanied Johnson’s appointment as J.C.
Penney’s CEO in November 2011 because as Apple Inc.’s retail
chief he helped make the iPad seller’s stores a hit. Many of the
long-distance commuters are former colleagues from Cupertino,
California-based Apple.

Falling Sales

Johnson’s first year at J.C. Penney hasn’t gone well, with
sales falling 25 percent to $13 billion, the lowest since at
least 1987. The shares have declined 51 percent from Nov. 1,
2011, the day Johnson took over as CEO. The Standard & Poor’s
500 Index has gained 27 percent in that time. J.C. Penney fell 4
percent to $15.53 at the close in New York.

J.C. Penney has three jets registered to it, two Gulfstream
G450s and one Gulfstream G-IV, according to the Federal Aviation
Administration’s website.

“Regardless of where our executives are based, their work
requires extensive travel visiting stores and distribution
centers; meeting with current and potential business partners
across the U.S., Europe and Asia; as well as exploring new
developments for possible expansion,” Kristin Hays, a
spokeswoman, said in an e-mail.

While most of the company’s leadership is based in Plano,
“it’s important that leaders devote their time and energy on
transforming the company wherever their job responsibilities
require them to be,” she said.

‘Permanent Residence’

“Several of the people who currently travel to Plano from
other cities are in the process of setting up permanent
residence here and are moving to the Dallas area,” Hays said.
“With all the travel retail leaders do, it doesn’t always make
sense to uproot and relocate their families, move them away from
friends and family to a new city -- only to be gone traveling to
visit vendors, stores or overseas.”

The company declined to make the commuting executives
available for comment.

A typical round-trip flight on a Gulfstream GIV-SP between
Dallas and San Jose, California, costs about $41,817, according
to a quote from Starbase Jet, which says it’s the largest
private-jet company in Texas. Quotes for that plane are nearly
identical to those for a G450, according to Starbase, which has
offices in Houston and Addison, Texas.

The merits of telecommuting and office face time have been
debated recently after Yahoo! Inc. CEO Marissa Mayer last month
ordered staff to report to offices. Being side by side fosters
collaboration and improves work “speed and quality,” Jackie
Reses, Yahoo’s executive vice president of people and
development, said in a memo to employees when the change was
announced.

California Fridays

The J.C. Penney executives who live in California often
spend Fridays working in an office there after departing Texas
on Thursdays, the people said. J.C. Penney, with about 1,100
locations, has offices in Texas, California and New York, Hays
said.

Remaining in California was part of Johnson’s agreement to
lead J.C. Penney. He and his wife have school-age children and
they decided it didn’t make sense to “uproot the family given
his travel schedule,” Hays said. Johnson was recruited to J.C.
Penney in 2011 by billionaire investor Bill Ackman, whose
Pershing Square Capital Management LP is the company’s biggest
shareholder, with an 18 percent stake.

Apple Alumni

J.C. Penney human resources head Dan Walker also is based
in California, along with Sissie Twiggs, vice president, and
senior vice presidents of sourcing Amy Leonard and Donna
Isralsky, the people said. Walker, Twiggs, Fay, Fisher, Laughrea
and Miller have all worked at Apple, according to the people,
company announcements, public records and profiles on LinkedIn.

J.C. Penney didn’t dispute the names and locations from
which the executives are commuting in a list e-mailed to
spokeswomen.

The commuting slows some decision-making and has
contributed to an adversarial relationship between new
executives and long-standing employees, the people said. Three
people who worked in the headquarters said the acronym, DOPE --
short for “dumb old Penney employees” -- has been used in the
office to refer to the company’s longer-standing workers.

Hays said she has never heard of that term being used.

“Their claim has no merit, and it misrepresents the level
of respect and support we provide to one another,” she said.

Workforce Reduction

J.C. Penney and its units employed about 116,000 full- and
part-time employees as of Feb. 2, compared with 159,000 about a
year ago, according to an annual filing yesterday. That’s a 27
percent reduction in the workforce.

“Our business has shifted towards a decentralized
management structure that distributes significant control and
decision-making powers among our senior management team and
other key employees, some of whom are located in satellite
offices,” J.C. Penney said in the filing.

The retailer’s customers have been alienated by marketing
missteps and a failed attempt to transition away from sales and
coupons. J.C. Penney is now betting that Johnson’s plan to turn
most stores into collections of boutiques will fuel a return to
growth by resonating with core shoppers and new customers.

Former CEO Allen Questrom, who retired from the retailer in
2004, said earlier this month that a turnaround won’t work under
Johnson and that the longer the board waits to fire him, “the
worse it’s going to get.” The company said on March 12 that
Johnson has no plans to quit or resign.

“If you’re in a turnaround, you want everyone in the
trenches with you at the same time,” Gross said. “There’s no
substitute for having boots on the ground.”